With shares of Ford Motor Company (NYSE:F) trading around $10.92, is F a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
On October 30, Ford posted third-quarter 2012 earnings that showed pre-tax profits of $2.2 billion, or $0.40 per share. This makes 13 consecutive quarters of pre-tax profit, and three quarters in a row where the company beat Wall Street expectations.
The company logged $2.3 billion pre-tax profit from its North American business unit, which boasted a record 12 percent operating margin. Ford posted pre-tax profit of $9 million in South America, and $45 million from its Asia Pacific Africa unit.
In October, Ford announced that it would be closing three plants in Europe, including a major factory in Genk, Belgium. The facility will cost about $1.1 billion to close and produce an estimated savings of $730 million annually. The 4,300 employees and local government have made an effort to change the company’s mind, but overcapacity and evaporating demand have forced Ford’s hand. European new car sales dropped 7.2 percent across the board for the first nine months of 2012, and Ford is only operating at about 52 percent of its capacity, resulting in massive losses estimated to top $1.5 billion for the region in 2012.
H = High Quality Pipeline
Instead of trying to cover the entire scope of Ford’s product line up, we’re going to highlight just one recent U.S. launch. Ford’s model-year 2013 C-Max Hybrid SE is hitting the American markets, and is taking punches directly at Toyota’s (NYSE:TM) Prius V.
This launch is significant given the phenomenal success of the Prius in the America. The Prius family is by far the best selling line of hybrids, and if Ford is going to continue its North American power play, it needs a strong competitor in the space. There were 355,805 hybrid car sales in the U.S. in the first nine months of 2012, compared to 266,329 for all of 2011. The Ford Fusion comes in pretty low on the list of best selling hybrids in the U.S.
Ostensibly, the C-Max is the contender that Ford needs. According to Edmunds.com, the C-Max has 188 horsepower compared to the Prius V’s 134. The C-Max gets 47 mpg on the highway versus 40 mpg for the Prius V. The C-Max even costs less, with a sticker price of $25,200 compared to $26,550 for the Prius V.
To be fair, the Prius V is more or less the runt of the Prius family.